One of the more frustrating situations that consumers find themselves in is difficulty qualifying for a checking account.
Increasingly, banks are running checks on your behaviors before deciding to allow you to open an account.
As a result, some customers don't past muster and find themselves unable to open an account.
What are Some of the Reasons You Can Be Denied a Bank Account?
When you try to open an account, the bank may actually run a credit check. Even though you aren't applying for a loan, some banks are interested in your credit, since it can be an indicator of your level of financial responsibility. If you have poor credit, that might be grounds to refuse you a bank account.
In some cases, rather than running a more traditional credit check, a bank will pull your Chexsystems report. Chexsystems is a consumer reporting agency that tracks your bank account. If you overdraw your account, or if you bounce a check, your bank can report that information to Chexsystems, and it will appear on your report for up to five years. Some banks will allow you to open an account when you have a few items noted, while other banks will refuse to let you open an account with even one negative item on your Chexsystems report.
Banks track this information, and if it appears that you are a serious risk, you might not be able to open a regular checking account. This is especially possible if the bank has closed your account due to recurring problems. If you have overdrawn your account and you owe fees that you haven't paid, it will be very difficult to open a checking account elsewhere. It can be hard even if you have repaid what you owe.
Even if you are denied a regular checking account because of your history, you do have other options. You can ask for a second chance checking account, or you can turn to a prepaid debit card with banking options.
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Second Chance Bank Account
In some cases, if you are denied a regular checking account, you might be offered what is known as a “second chance” checking account.
These accounts come with more restrictions than a regular account, and often come with higher fees.
You might have to pay $15 instead of $12 a month — with no option to waive the fee after engaging in a certain number of transactions each month.
Additionally, you might find a daily withdrawal limit, such as $100 a day. Many second chance checking accounts also refuse to allow you overdraft protection; any transaction you don't have sufficient funds for is denied.
Some banks, like PNC Bank, require you to go through an educational course, teaching basic finance and using your checking account properly. If you show responsible financial behaviors with your second chance account, then you might be allowed to move to a regular checking account after at least six months. (One of the nice things about PNC is that the monthly fee is relatively low, at $5.)
Prepaid Debit Card
Another option, especially if you want to avoid monthly fees in excess of $10, is to get a prepaid debit card. Normally, a prepaid debit card is considered an inferior product. But if you can't get a bank account, and if you are careful about which prepaid debit card you choose, you can avoid really high fees, and receive many of the same banking benefits that come with a traditional account, including:
- A savings option
- Direct deposit
- Bill pay
- Debit card
Make sure you double-check the fee schedule, though, since some debit cards charge fees for everything from checking your balance to taking a withdrawal to adding more funds to your card. Some of the more interesting options that can provide you with a relatively low-fee prepaid debit alternative to a bank account include Mango Money, American Express Bluebird, and Green Dot Card.
You do have options beyond paying outrageous check-cashing fees at the grocery store if you are denied a regular checking account. As you work to get your finances back in order, use a second chance checking account, or a prepaid debit card as an alternative to a more traditional banking arrangement.